US President George W. Bush believes Tehran has no choice but to choose between 'isolation' and a 'better relationship with the West'.

In a Tuesday statement, Bush claimed that the Islamic Republic could not be trusted with enrichment and threatened to tighten the screws should the Iranian government refuse to suspend its nuclear activities.

"They can either face isolation, or they can have better relations with all of us,'' Bush said.

"A group of countries can send a clear message to the Iranians, and that is: we're going to continue to isolate you, we'll continue to work on sanctions, we'll find new sanctions if need be if you continue to deny the just demands of a free world,'' he added.

He accused Iranian banks of abusing the international banking system to support proliferation and terrorism and stressed that the time has come for 'strong diplomacy'.

The Bush administration is believed to be studying military options against Iran as part of a broader strategy of coercive diplomacy to pressure Tehran into abandoning its uranium enrichment program.

Iran has repeatedly stressed that its nuclear program is a civilian one and that it would deliver a crushing response to any military attack.